top of page

Unofficial Earnings Play

Unofficial Earnings Play

Hello Smart Option Sellers! I mentioned yesterday that I may have an unofficial earnings play for everyone today. The company releases earnings after the bell today and although the option prices are not as cheap as I'd like them to be, I'm still going to give you the play. Use this as you will in deciding whether or not to enter. Remember, it's unofficial. Lululemon (LULU) Lulu is a clothing manufacturer of mostly women's workout and athletic gear. You don't need to know much more than that. What you do need to know is that for whatever reason, LULU has managed more times than not to jump big either higher or lower after announcing earnings. I'm thinking this time won't be much different. The problem here is that the option market-makers think so as well, and have priced the options accordingly. Summary: we won't be able to find a real bargain. But, it doesn't mean we still can't try. With LULU having the capability to jump higher or lower by at least $5 to $10 per share after earnings, we're going to want to concentrate on that radius. If we want to take advantage of a potential large move and find cheap options at the same time, we need to set our sights on a few different strike prices. And since we don't know which way the stock will move, we'll once again be buying both call options and put options. The stock is currently trading near $64.50 per share. This means that you need to look at the $59.50 puts and lower ($59 puts, $58.50 puts, $58 puts, etc.) and the $69.50 calls and higher (70 calls, $70.50 calls, $71 calls, etc.) You will use the options that expire on this Friday March 31st (make sure you get this right). Currently, the $59.50 puts and the $69.50 calls are the closest to being in that $5 radius away from the current stock price and each are about $.70 per contract. Unfortunately, that's not even close to the cheapie $.05 options we're looking for. If you go further out and look to the $54 puts and $74.50 calls for example, those each cost about $.15 per contract. But, that just means the stock has to move so much farther before those options become profitable. The stock would have to jump over $10 - $11 per share after earnings, whereas if you bought the $59.50 puts and the $69.50 calls, the stock would have to jump about $6 - $7 after earnings in order to be profitable. It all comes down to how far you think the stock can move after earnings and how much you're willing to spend. Now, if the stock jumps $15-$20 after earnings, all of those options within a $10 radius would score big time. But that's asking a lot. My best advice if you want to get involved in this play is to choose call and put option strikes probably about $5-$7 away in radius from the price of the stock at the time of your entry. This would give you a cost of roughly $.35 - $.70 per contract on each side, making your total investment about $.70 - $1.40 per contract all-in. If you bought one contract of each call & put, you're spending $70 - $140 total. If you bought five contracts of each, you're spending $350 - $700 total. If you bought ten contracts of each, you're spending $700 - $1,400 total. You need to decide what your wallet can afford and how big of a jump you're thinking the stock can make. Clearly, this is not one of the cheapest earnings plays. There's no doubt LULU has the history of big jumps. The question is, will it repeat, and by how much. The worst case scenario is if earnings come out in-line with all the estimates and the stock goes nowhere. If that happens, all option prices (calls & puts) within that $5 - $10 radius will just evaporate within seconds and become worthless. As I say, earnings plays are always a crapshoot, but if you stick to stocks that have a history of jumping, you'll have better odds. That's all for now. Let us know if you decide to get into this unofficial play. I will send an update tomorrow on the results and follow-up action. You can contact us here. Regards, Lee Let's Grab That Cash!


Important Messages: 1. I'm on Twitter! What does that mean? It means I will be posting some of my thoughts from time to time on items related to investing, the stock market and how to be a smarter options trader. If you are already a Twitter member, please go to the website and click on the blue Twitter "Follow" button that you'll see along the top header. This way you can read my tweets and have instant access to some of my other thoughts. And don't forget to "like" or "re-tweet" my posts. This helps increase the public's awareness of the great things we're doing at The Smart Option Seller. Don't worry, no one in the public will have access to any of our trading ideas, nor will I post any of our current trades for free. 2. Don't forget to read my new "Put-Selling Basics" guide. It's a great refresher for both experienced and new traders. It's totally free. You can find it on the website or just click here to read. 3. Many of you are not taking advantage of our phone text alert messaging system. If you'd like to be notified on your mobile phone when a new alert is about to hit your email inbox, join our text alert system by typing in your first & last name and mobile number here: 4. All alerts will be archived on the website under the "Archive" section which you can find along the top menu of the website. If you are a new member, please use this section to read past alerts to see what we've been doing. This is a password-protected area for Smart Option Seller members only. Your password to enter this area is smartoption. Please write this password down and keep it in a safe place. You will need it to access the Archives. 5. Don't forget about our Referral Program. See details here: As always, if you have any questions, comments or feedback, please let us know. Thank you! You can contact us here.


Smart Option Seller Portfolio


Important Notice: All opinions, recommendations and content published by Smart Option Seller, LLC ("Company" or "us" or "we") are solely for informational and educational purposes, and should not be considered personalized investment advice. Your use of any investment ideas provided by Company is your responsibility and should only be made after consulting with your investment advisor and reviewing the public filings and financial statements of companies you are considering for investment. We do not receive any compensation from companies we write about. By accepting a subscription to The Smart Option Seller newsletter, you acknowledge that all ideas discussed in the newsletter are solely for informational and educational purposes and you agree to hold harmless Company and all Company employees and representatives for any investment losses suffered by you arising from ideas discussed or recommendations made in the Smart Options Seller website or newsletter. You should not make any investment decision based solely on what you read in the Smart Option Seller newsletter. The information provided is obtained from sources which we believe to be reliable, but we do not guarantee the accuracy or completeness of any such information. We are not liable for any losses suffered by you as a subscriber. Past performance is not indicative of future results. Please plan accordingly. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Company is not a broker, dealer or investment adviser. In addition, our employees may answer your general customer service questions but they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. See our full Terms-of-Use here

Recent Posts
bottom of page